Orlando Harmon
Small business health insurance, also known as group health insurance, is a way for small business owners to provide health coverage for their employees. The number of employees is a key factor in determining eligibility for small business health insurance. In the US, small businesses with 2-50 full-time employees may be eligible for the Small Business Health Options Program (SHOP) Marketplace, which offers affordable and flexible plans. If you are a sole proprietor or self-employed, you can also find out about coverage options and contribute to your employees' healthcare costs with Health Reimbursement Arrangements (HRAs). There are several types of plans to choose from, such as EPOs, POS, and HDHPs, each with different monthly premiums and out-of-pocket costs.
| Characteristics | Values |
|---|---|
| Number of employees | Small group plans are for employers with up to 100 employees, key accounts are for 101-5000, and national accounts are for more than 5000. Small business health insurance is for employers with 1-50 full-time employees. |
| Self-employed | If you are self-employed with no employees, you may be able to get individual coverage through the Health Insurance Marketplace for individuals and families. |
| Types of plans | EPO, POS, and HDHP are some of the types of plans available. EPOs offer a local network of healthcare providers and lower monthly premiums but higher deductibles. POS plans require a referral from a PCP and cover out-of-network doctors at a higher cost. HDHPs have low premiums but higher out-of-pocket costs and are often paired with an HSA. |
| Cost | The cost of small business health insurance depends on the type of plan and the amount of coverage needed. Employers can deduct premium costs not covered by tax credits from their taxes. |
| Eligibility | Eligibility requirements vary, and businesses should review these to see if they qualify for small business health insurance. |
| Resources | HealthCare.gov and Anthem offer resources to learn more about health insurance products and services for small businesses. |
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What You'll Learn
- Small Business Health Insurance Plans: EPO, POS, and HDHP plans
- Small Business Health Options Program (SHOP): Available to small businesses with 1-50 full-time employees
- Tax Benefits: Small businesses may qualify for a tax credit of up to 50% of premium costs
- Group Health Plans: Offered by UnitedHealthcare for small groups (up to 100 employees)
- Health Reimbursement Arrangements (HRAs): Help contribute to employee healthcare costs
Small Business Health Insurance Plans: EPO, POS, and HDHP plans
As a small business owner, you can purchase health insurance for your employees, also known as group health insurance. This insurance provides coverage for your employees and can also include yourself and your family members. Small business health insurance plans can be a great incentive to attract and retain employees.
There are several types of small business health insurance plans, including EPO (Exclusive Provider Organization), POS (Point of Service), and HDHP (High Deductible Health Plan). Each plan has its own unique features, and it's important to understand the differences to determine which one best suits your business needs.
EPO plans offer a local network of doctors and hospitals for your employees to choose from. This type of plan usually comes with lower monthly premiums but higher deductibles when healthcare services are needed. EPOs do not require referrals to see specialists, which is a convenience that some may be willing to pay extra for. However, if your employees seek care outside the EPO network, they will likely have to pay the full cost of that visit.
POS plans offer more flexibility, allowing your employees to decide at the point of service whether to stay within the network or go outside the network and seek care from a doctor of their choosing. POS plans may require a referral from a primary care physician (PCP) to see a specialist, and they usually come with slightly higher premiums. While POS plans cover out-of-network doctors, the out-of-pocket costs are higher compared to in-network doctors.
HDHPs offer lower monthly premiums but higher upfront out-of-pocket costs. Employers often pair HDHPs with Health Savings Accounts (HSAs) to help employees cover their deductibles. With an HSA, employees can deposit pre-tax dollars to cover medical expenses, resulting in significant tax savings. Depending on age, the plan may cover certain preventive services such as mammograms, colonoscopies, and annual well visits at no extra charge.
When deciding between EPO, POS, and HDHP plans, it's important to consider the specific needs of your business and your employees. Evaluate factors such as the size of your business, the number of employees, their healthcare requirements, and your budget. By comparing the features and benefits of each plan type, you can make an informed decision that best meets the healthcare needs of your small business.
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Small Business Health Options Program (SHOP): Available to small businesses with 1-50 full-time employees
If you are a small employer with 1-50 full-time employees, you may be able to offer them Small Business Health Options Program (SHOP) coverage. SHOP insurance is available to small businesses in most states, with some states allowing businesses with up to 100 employees to qualify.
SHOP coverage can be started at any time of the year, and you can choose the coverage you offer and how much you pay toward employee premiums. You can select from high-quality private health insurance plans that meet your business and employees' needs. For example, you can choose to offer health only, dental only, or a combination of health and dental coverage. Additionally, you can explore supplemental plans for vision, disability, and more.
If your business has fewer than 25 employees, you may be eligible for the Small Business Health Care Tax Credit, which can cover up to 50% of your premium costs. This credit is generally available when an employer enrols in a SHOP plan. You can use the Small Business Health Care Tax Credit Estimator to determine your eligibility and potential savings.
To learn more about SHOP coverage and eligibility, you can visit HealthCare.gov, which provides information on health insurance products and services for your employees. Additionally, you can explore options like Health Reimbursement Arrangements (HRAs) and group health plans to contribute to your employees' healthcare costs.
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Tax Benefits: Small businesses may qualify for a tax credit of up to 50% of premium costs
Small businesses may be eligible for a tax credit of up to 50% of premium costs. This is known as the Small Business Health Care Tax Credit. To qualify, a business must meet the following criteria:
- Have fewer than 25 full-time equivalent (FTE) employees.
- Pay an average employee salary of $50,000 per year or less (this amount is inflation-adjusted and was $62,000 in 2023).
- Pay at least 50% of full-time employees' premium costs.
- Offer Small Business Health Options Program (SHOP) coverage to all full-time employees.
It is important to note that seasonal workers are generally not included in the full-time employee and wage calculation unless they work for more than 120 days during the tax year.
The Small Business Health Care Tax Credit can result in significant tax savings for eligible small businesses. For example, if a business paid $72,000 in health care premiums for its employees and met all the requirements for the full amount of the credit, it could claim a credit for $36,000 (50% x $72,000).
To maximize tax savings, businesses should claim as large a tax credit as possible and then deduct any remaining premiums. Additionally, businesses can deduct any premiums exceeding the credit and carry unused credits forward or back.
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Group Health Plans: Offered by UnitedHealthcare for small groups (up to 100 employees)
UnitedHealthcare offers a range of group health insurance options for small businesses with up to 100 employees. As a carrier of choice for over 235,000 employers, UnitedHealthcare has the experience to deliver a health benefits solution tailored to your business.
Their Small Group plans are designed to help small businesses save money and support the health and well-being of their employees. UnitedHealthcare offers a variety of group health plans and network options, including open access, high deductible, and preferred provider plans. They also provide supplemental plans for dental, vision, and disability coverage, as well as integrated pharmacy benefits through OptumRx, which can help lower costs for employers and their staff.
UnitedHealthcare's group health plans also include solutions for mental health and wellness, such as virtual services, on-demand programs, and clinical care. Additionally, they offer a whole-person approach to health with benefits like wellness programs, behavioural health support, and care management services.
To get started with UnitedHealthcare's Small Group health plans, you can complete a quick form to request a quote. A UnitedHealthcare representative will then contact you and work with you to find the best group health insurance options for your small business.
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Health Reimbursement Arrangements (HRAs): Help contribute to employee healthcare costs
As a business owner, you can contribute to your employees' healthcare costs through Health Reimbursement Arrangements (HRAs). This is an alternative to offering a traditional group health plan and is available to employers of any size, as long as there is at least one employee who isn't self-employed or the spouse of a self-employed owner.
HRAs are account-based health plans that allow employers to provide non-taxed reimbursements to employees for qualified medical expenses. This includes monthly premiums and out-of-pocket costs like copayments and deductibles. Employees must be enrolled in individual health insurance coverage, such as a plan purchased through the Marketplace, to use these funds.
There are different categories of Health Insurance Marketplace plans, sometimes called "metal levels". Silver plans, for example, are considered middle-tier, where you pay moderate monthly premiums and costs when you need care. If you qualify for "cost-sharing reductions", you can save on deductibles, copayments, and coinsurance by choosing a Silver plan.
The affordability of an HRA offer is based on the employer's contribution, the employee's annual household income, and the monthly premium of the lowest-cost, self-only Silver plan in the employee's area. Employers can use tools like the Employer Lowest Cost Silver Plan Premium Look-up Table and the HRA Affordability Tool to determine the affordability of their HRA offers.
The Internal Revenue Service (IRS), in conjunction with other departments, has issued rules and regulations regarding HRAs. These include conditions for integrating HRAs with individual health insurance coverage or Medicare, as well as guidelines for determining affordability and eligibility for tax credits.
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Frequently asked questions
Small business health insurance, also known as group health insurance, provides small business owners with access to coverage for their employees. Small group plans also provide valuable incentives to attract and retain employees.
EPO (Exclusive Provider Organization) plans offer a local network of doctors and hospitals to choose from, with lower monthly premiums and higher deductibles. POS (Point of Service) plans require a referral from a PCP before seeing a specialist and cover out-of-network doctors at a higher out-of-pocket cost. HDHP (High Deductible Health Plan) has low premiums but higher immediate out-of-pocket costs and can be paired with a Health Savings Account (HSA).
Small business health insurance is generally available to employers with 1-50 full-time equivalent employees (FTEs), although some states qualify employers with up to 100 employees. You can use an FTE Employee Calculator to determine your eligibility.
